SECTOR SPOTLIGHT: Taxation in

Taxation in Tanzania Hanif Habib Advisory Limited is based in Dar es Salaam. Managing Partner Hanif Habib, Sr. always aspired to establish an audit firm and consulting company that allowed him to use his professional financial expertise, extensive business experience and ability to interact with his clients and the business community at large on a worldwide basis. He is a Tanzania Revenue Authority-registered Consultant; a UK Chartered Certified Accountant; a General Tax Practitioner with the South African Institute of Tax Practitioners; Commissioner of Oaths (Republic of South Africa); a Certified Forensic Investigation Professional, and an active member of the Institute of Internal Auditors and the Association of Certified Fraud Examiners. He talks to Acquisition International about taxation in Tanzania…

The basic principles of Tanzanian tax laws will be 25% corporation tax for three years, provided at Presumptive familiar to anyone in the UK or the US but the least 30% of their shares are publically issued. Specific and presumptive income tax rates apply devil, as they say, is in the detail. for individuals with businesses where the annual Capital Deductions turnover does not exceed TZS 20 million. Any For instance, unlike the UK and the US the The government has given help to the businesses with a higher turnover is obliged to Tanzanian tax year is the calendar year, although agricultural sector by offering 100% capital prepare audited financial statements in respect companies may request a different 12-month deduction allowances on plant & machinery of their business. period. used in Agriculture. This compares to the 20% offered to the Oil and Gas Exploration Industry & Any taxpayer whose turnover exceeds TZS 14 Corporation Income Tax 25% to Manufacturing & Mining Operations. million a year is obliged to acquire and use an At first glance corporation tax for Tanzanian- Electronic Fiscal Device. Failure to acquire and resident companies and non-resident businesses A straight line capital deduction for agricultural use an Electronic Fiscal Device or issue a fiscal is the same at 30% but a non-resident or fish farm buildings of 20% also applies – it is receipt/invoice can lead to a minimum fine of corporation with a 5% for buildings in all other sectors. not less than TZS 3 million or a prison sentence also has to account for tax of 10% on of up to 12 months, or both. Anyone who fails ‘repatriated income’. To be Tanzanian-resident For companies with more than four employees to demand and retain fiscal receipt or invoice is a company must be incorporated under the a skills and development levy of 5% applies to liable to a fine of TZS 1 million or imprisonment, Tanzanian Companies Act or, at any time during gross emoluments, which include: leave pay, sick not exceeding three months, or both. the tax year, management and control of its pay, payment in lieu of leave, fees, commissions, affairs must be exercised in Tanzania. Branch gratuity, bonuses, subsistence allowances, Withholding Tax Rates profits are also taxed at 30%. travelling allowances and entertainment Dividends paid to a resident company controlling allowances, and other taxable benefits, as well 25% or more of the distributing company’s Newly listed companies pay a reduced rate of as wages or salary. shares and dividends paid by a company listed

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2013/2014 TANZANIA TAX GUIDE

INDIRECT : VAT Value Added Tax:

Taxable Supplies Rate* % Supply of taxable goods & services in Mainland Tanzania 18 Import of taxable goods & services into Mainland Tanzania 18 of goods & certain services from the United Republic of Tanzania 0 Registration threshold (turnover) Where the taxable turnover of any taxable person exceeds or is likely to exceed:

(a) Tanzanian Shillings Forty Million (Tshs. 40,000,000=00) in a period of 12 consecutive months; or (b) Tanzanian Shillings Ten Million (Tshs. 10,000,000=00) in a period of three consecutive months.

Payment Due date

Monthly VAT returns and any related payments are due on the last working day of the following month to which it relates.

VAT on the importation of goods is payable at the time becomes payable.

Refund claims

Standard Six months after the due date of the tax return on which the refund became due or the submission of the last VAT return for that six month period, whichever is the later.

"Regular repayment" Businesses in a constant refund position may apply for authorisation to lodge claims on a monthly basis. SECTOR SPOTLIGHT: Taxation in Tanzania *Note: Entities entitled to special relief either pay VAT at 9% (45% restricted exemption) or benefit from full relief. Time restriction of 3 years apply to VAT Refund claims on the Dar es Salaam stock exchange are Customs Duty: subject to a 5% withholding tax. Otherwise the withholding tax is 10%. %

Capital goods, raw materials, agricultural inputs, pure-bred animals , pharmaceutical goods 0 The withholding on interest paid to a 2013/2014 resident or non-resident is 10%. The withholding Semi-finished goods 10 TANZANIA TAX GUIDE tax on royalties and natural resource payments Finished commercial or final consumer goods 25 paid to residents and non-residents is 15%. : Equipment and supplies imported by mining operator / subcontractor Withholding rates for rent on land and - up to 1 year after commencement of production %0 buildings and aircraft leases is 10% for resident Conveyance / transfer 1 Transfer- thereafter of shares or debentures 15 (max) corporations and 15% for non-residents. Other Lease agreements 1 assets are fixed at zero for residents and 15% LegalEquipment and commercial and supplies instruments for petroleum (maximum and gas Stamp exploration Duty of Tshs. 10,000=00) 10 for non-residents. Note: Stamp duty on conveyance of agricultural land is restricted to TZS 500; Stamp Duty is payable within 30 days from the date an instrument is signed.

Indirect Taxes: VAT Mineral Royalties: The supply of taxable goods and services in Correspondent firm of Russell Bedford International Mainland Tanzania and the import of taxable Rate Mining Actwww.russellbedford.com 1998 Mining Act 2010 % goods and services into Mainland Tanzania is 5 Diamondswww.habibadvisory.com Diamonds, Gemstones, Uranium Page of 6 15 fixed at 18%. The export of goods and certain 4 N/A Metallic minerals (incl. copper, services from the United Republic of Tanzania is gold, silver and platinum group zero. minerals)

3 General rate General rate Registration threshold (turnover) where the 1 N/A Gems taxable turnover of any taxable person exceeds or is likely to exceed: TZS 40 million in a period 0 Polished & Cut Stones N/A of 12 consecutive months; or TZS 10 million in a Base: "Net back value" "Gross value" period of three consecutive months. TAX TREATIES IN FORCE:

The payment due date for monthly VAT returns 540,000Canada, Denmark,– 720,000 Finland, India, Italy, Norway, South Africa, Sweden,exemptions Zambia for agricultural land, certain shares and any related payments are due on the last 60,700 plus 25% of the amount in excess of and private residences whose value rises by less DEADLINES, INTEREST AND PENALTIES: working day of the following month to which TZS540,000 than TZS 15 million. it relates. VAT on the importation of goods is 720,000 and above Deadline/Obligation Immediate Monthly penalty penalty payable at the time customs becomes duty 105,700 plus 30% of the amount in excess of There is also a single instalment% tax on gains% payable. Refund claims can be made a standard TZS720,000Income Tax: from the sale of investment assets (land, six months after the due date of the tax return Instalment tax/return buildings and shares) which is levied at 10% for on which the refund became due or the As in otherPayment countries some benefits instalment offered at end of eachresidents quarter and 20% for non-residents. Stat + 5 submission of the last VAT return for that six by employers to employees are also taxable. Filing of return end of 1st quarter 2.5* month period, whichever is the later. ‘Regular Company cars are taxable according to engine Duty on Electronic Money Transfer & repayment’ businesses in a constant refund size and Undervehicle-estimation age but this tax is not charged Electronic Communication Services Stat position may apply for authorisation to lodge when the employer does not claim deductions There is an imposition of 0.15% Excise Duty on claims on a monthly basis. in respect of the ownership, maintenance, or money transfers via banks, financial institutions operation of the vehicle. The social security levy and telecommunications company for amounts

Customs Duty is 20%, of which the employee paysCorrespondent a maximum firm of Russellexceeding Bedford International Tshs. 30,000 (approximately USD Again, to support the agricultural and mining of 10%. Donations made by employees aswww.russellbedford.com per 18.5). Excise Duty on Electronic Communication exploration industries there is a zero customs Section 12 of the Tanzanian Education Fund Services (internet, voice calls, etc.) is charged at www.habibadvisory.com charge for capital goods, raw materials, Act are exempt from tax. But these exemptions 17%. These taxes are borne by final consumer.Page 7 of 15 agricultural inputs, pure-bred animals and are only allowed upon approval by the pharmaceutical goods. Also included at zero are commissioner. Tax Treaties in Force equipment and supplies for petroleum and gas The Tanzanian Government has tax treaties in exploration. With the exception of housing – where the force with the following countries: Canada, taxation rate depends on the market value of Denmark, Finland, India, Italy, Norway, South Individual Income Tax Rates the property, the employee’s income and the Africa, Sweden and Zambia. As with many other countries, personal income expenditure claimed on the property by the tax is based on a graduated scale, with the scale employer – calculations of taxable benefits being based on a monthly income. The currency depend on the market value of the benefit. in Tanzania is the (TZS), at the time of writing £1 equated to TZS2,650 while Stamp Duty US$1 equated to TZS1,620. Stamp duty for conveyance/transfer, transfer of share or debentures, lease agreement, legal and Company: Hanif Habib Advisory Limited The tax payable on monthly income ranges is: commercial instruments is fixed at 1%. Name: Hanif Habib, Sr. 0 – 170,000 Web: www.habibadvisory.com 0% Disposal of Investments Email: [email protected] 170,000 – 360,000 Tax on disposals is charged at 30% for Address: India Street Plot 304/102, 13% of the amount in excess of TZS170,000 corporations. For non-resident individuals Dar Ceramica Building 6th Floor, Office no 6B, 360,000 – 540,000 selling a Tanzanian asset it is 20%. For resident Dar Es Salaam, Tanzania. 24,700 plus 20% of the amount in excess of individuals selling a Tanzanian asset the tax is Telephone: +255 785 020404 TZS360,000 10%, 30% if selling an overseas asset. There are Fax: +255 736 604126

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